The Lusty Allure
of Loyalty

By Piers Schmidt

Love them or loathe them, loyalty programs are a defining feature of the hospitality landscape. But let’s take a step back. What, in fact, is being measured and rewarded by these programs? Is it really loyalty or incentivised habit? Are we actually faithful to the promoter brands?

Opinion Piece

The consolidation of their three loyalty programs (SPG, Marriott Rewards and Ritz-Carlton Rewards) into Marriott Bonvoy may have provided much of the investment logic behind Marriott’s acquisition of Starwood, whose combined unique members now number more than 100 million.

IHG Rewards Club (100 million), Wyndham Rewards (52 million), Hilton Honors (63 million), Le Club AccorHotels (33 million), World of Hyatt (20 million) and other similar mechanisms, including global airline programs, promise a range of rewards to reimburse customers for frequent purchase. Hilton estimates approximately 57% of its occupancy comes from via Honors, so it’s clear that such programs work.

Some are simple schemes in which earned points may be redeemed for free or discounted nights and upgrades. Others introduce the alluring prospect of free gifts and exclusive events curated by peer partners.

Either way, the rich customer data that these schemes yield also is supposed to provide a basis for brands to better personalise their offerings, thereby generating even greater loyalty among the loyal. Or so the wisdom goes because I can’t remember the last (or, for that matter, the first) time my needs were anticipated or exceeded based on data captured by a rewards or frequent flyer program. Instead, they bombard me indiscriminately with poorly matched ‘offers’ and generic enticements to purchase more and again. Thanks for trusting that I’m loyal!

But let’s take a step back. What, in fact, is being measured and rewarded by these programs? Is it really loyalty, as the name implies, or more prosaically just repeat behaviour or incentivised habit? Are we actually faithful to the promoter brands or just dopily devoted to their invitations to collect?

By definition, being ‘loyal’ is giving or showing firm and constant support or unswerving allegiance to a person or institution, although my favourite synonym for the concept is steadfastness. But are the millions of members of the so-called loyalty programs demonstrating unswerving allegiance, or are they really just lazy selectors or points addicts unable to kick their patterned behaviours? Perhaps, more likely, they simply fear missing out on promotion to or retention of an elite tier status? Is the terror of losing precious lounge or club floor access just too great a barrier to switching?

In my experience, there is a critical distinction between a customer who is a member of a loyalty program (or, ironically, quite probably several programs) and a customer who is truly loyal to a brand. These two individuals may regularly purchase rooms at the same hotel but there is a fundamental difference in what drives their behaviour. Loyalty program members are motivated by discounts and upgrades, whereas truly loyal customers are influenced by their affinity and affection for the brand.

For example, if British Airways removed the obligation they place on me to accumulate 1,500 tier points every year in order to retain my gold card, would I exhibit the same repeat purchase pattern that I do?

As this rhetorical question illustrates, many loyalty programs are really institutionalised forms of bribery as opposed to reliable indicators of fidelity. Every time I make gold again, does the Executive Club team at British Airways pride themselves for how well their colleagues in operations have performed to earn my loyalty? Or do they snigger at me for being so pathetically unable to resist the status anxiety they’ve cynically baked into their CRM? I have little doubt that it’s the latter and of course, this suspicion breeds an entirely different emotional relationship with the brand; one that’s far removed from the fidelity or steadfastness meant by loyalty.

For reasons of scale and competitiveness, most of the independent luxury hotel brands don’t even attempt to compete with the behemoths when it comes to loyalty preferring to make little and bespoke differences guest by guest.

I wonder, however, if the misnomer that masquerades as ‘loyalty’ doesn’t actually represent an opportunity, especially for the smaller brands that are excluded from the rewards club premier league. Genuine fidelity and allegiance is available to be bestowed by discerning customers and nowhere more than in luxury segments where the purchase risks are commensurately greater. Surely, without the complacency that must arise from knowing that you have millions of customers hooked on ‘crack’ points, innovation in this arena is not only possible but long overdue.

This article was first published in HOTELS Magazine.

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Piers Schmidt and Ian R Douglas of Phoenix Global are the co-founders of Kingham Leigh. This dynamic new partnership has been created to design, develop and operate innovative hospitality projects in Europe and beyond.

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